If you’re like most people, you don’t. You’ve got a vague idea, but you don’t know the specifics.

Of course you already know that you should track your spending, especially if you’re trying to create a successful budget. Every financial guru and their mama has shouted it from their soap boxes since preaching personal finance had become sexy.

So yeah–we already know we should track.

But how should we track our spending?

What are the best methods, tools, and tips for success?

I started tracking my expenses in high school. What the hell was I thinking? I surely didn’t have any major expenses or a need for a budget. I guess I was just a nerd and loved personal finance. Who knows.

As an adult, I’ve continued to track my spending.

You would think with all those years of experience, I’d be the Master of Tracking. My game would be financially sound; I’d have the tightest budget, and there would be no reason to “get my life straight.”

Not true.

There are psychological reasons why people are unsuccessful with tracking their spending. My reason is because of the money lies that I tell myself so that I can keep spending however I please. And if I know where my money is going, it means I will have to change my spending habits.

And I haven’t want to do that.

Until now.

Getting past the psychological reasons why I was unsuccessful at tracking my spending effectively, there are logistical reasons why I failed: procrastination, lack of tools, and poor feedback.

With my New Year’s Resolution to get my life straight, I’ve made a fresh commitment to improve my family’s financial standing, and with this new-found attempt at efficient tracking, here are some of the tools, tips, and tricks I will be using to track my spending:

Do you have a smart phone? If not, GET ONE. Track your spending with this free app and you can see what you’ve spent in any-which-way your heart desires: by category, by account, by payee….etc. It’s got all the reports and feedback you need in one place. This is NOT a sponsored recommendation; I just discovered it recently when rooting through my iPhone App store. There’s a free version, and the $1.99 version. Honestly, the only difference, from what I can tell, is that the paid version allows you to password protect it. But if you’re not entering account numbers, who needs to protect numbers, really? I love how easy it is to use, and the feedback it provides. Here are a few of my screen shots:

The interface is clean and well-organized.

Adding transactions is easy. You can specify TYPE of transaction (e.g. Expense or Income), and link the transaction to accounts, categories, and budgets. I like that you can name Payee’s, too.

This is handy: being able to schedule all your bills and then get reminders about those upcoming bills. Cool! All the GREEN dots are bills you’ve marked as “PAID” and all the RED are coming up.

Set up budgets so you’ll know how much is left in each budget.

This is the best section–the REPORTS. It allows you to see your data in so many ways. With this app, you have NO REASON to know know the full scope of your spending and income!

And seeing it in a pretty little graph is perfect! I love that you can see your expenses and incomes by WEEK, MONTH, QUARTER, and YEAR.

Oh! And it’s also cool that you an set general reminders!

2. Track in real-time.

Enter your expenses while actually standing IN LINE. Seriously, it only takes a second. At the very latest, set a reminder to track at night before you go to bed. Be sure to hold onto your receipts during the day, and then toss them when you’re done. No need to hold onto that clutter! Or jot it down quickly and then enter when you get to the car.

My method of tracking my expenses used to be shoving those annoying receipts into my wallet, and at the end of the month when I couldn’t close my wallet, THEN I would pull them all out and painstakingly enter each transaction into a cumbersome Excel file that I’ve been using for years. Sometimes it took HOURS to do this!

Tracking at the end of the month offers no feedback to help mitigate your spending habits during that month; if anything, it would only help you with the following month. And that’s not an effective way of monitoring. Monitor real-time, and you can make smarter spending decisions.

3. Track every single dime.

Yes, you must track even the 50 cents you gave your kids for the gumball machine. Tracking means EVERY EXPENSE. I know it seems a bit frivolous, but 50 cents here…..a quarter there….it all adds up.

4. Assign a category to each expense.

There are just some categories that are sooooo miscellaneous, that you can’t help but want to just mark it off as such and keep it moving. But it’s really important to assign each expense to a category so later, when creating your budget, you have accurate categories of where your money goes. I’m terrible at this. I never know where to file purchases like “batteries” or “postage stamps.” So I usually just stick them into some Misc category. And from what I can tell from my previous Excel budgeting sheet, I spent about $40-$50 a month on crap I’ve labeled “Miscellaneous”! Don’t do what I’ve done. This kind of labeling won’t get you anywhere!

5. Ask your spouse to track their spending, too.

Seems like common sense. But if you’re trying to change your family’s financial status, you really have to be on the same page with where you’re money is going.But our family has done terrible at this. Hubby and I keep separate accounts, and we usually don’t interfere in each others’ expenses. I will begin asking hubby to track his spending as well (which is sooo much better than mine). That’s the only way we’ll come up with a realistic budget and spending plan.

6. Track for longer than 1 month.

What I mean is…..don’t stop tracking after a month. In fact, keep tracking indefinitely. It might seem like a hassle now, but after some time, it will become second-nature, and you won’t even notice; it will just become “what you do.” People that do Weight Watchers and have lost 100 pounds from tracking and modifying their food intake don’t suddenly stop tracking just because they’ve hit their goal weight. They keep on tracking, in order to monitor their intake and ensure that they are sticking to their goals. Same thing applies to tracking your spending.

7. Use your data.

None of this tracking means anything unless you actually use your data for feedback, to make changes in your spending habits. In real-time, you can see where your money is going. And at the end of the month/quarter/year, you can ask yourself: Where is the majority of my money going? How much am I spending on eating out and groceries? Can I afford to cut back? Am I not spending enough in some categories, like entertainment? What surprised me the most about my spending? What changes can I make going forward?

So, those are just some tips that I have found to be successful–some of which I am doing, and some which I still need to work on.

What what about you?

Do you track your spending? What are some of your tips and tools that you use to track?

It is very difficult to track down every penny. But I recognize it’s importance. So I do is to collect all receipts, or write down the expenses right away. I find writing down the expenses easier. I have yet to try this computer software of tracking down money spending.

I track everything down. I have a little black book in my bag which I write everything down, as well as the YNAB system which is both on my desktop computers and as an iPhone app. It’s only free for 34 days, however I had to buy it as it’s awesome. Check it out here: http://ynab.me/chrissie